The challenges of contracting and accountability across the federal system: From ambulances to space shuttles

Publius: The Journal of Federalism

Volumn 34, Issue 3, 2004, Pages 155-182

  Johnston, Jocelyn M ^a,b   Romzek, Barbara S ^b   Wood, Curtis H ^c  

^a AMERICAN UNIVERSITY   (United States)

^b UNIVERSITY OF KANSAS   (United States)

^c NORTHERN ILLINOIS UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 22644447683     PISSN: 00485950     EISSN: None     Source Type: Journal    
DOI: 10.1093/oxfordjournals.pubjof.a005035     Document Type: Review

References (138)

1. Lisa A. Dicke, and J. Steven Ott, "Public Agency Accountability in Human Services Contracting, " Public Productivity and Management Review 22 (June 1999): 503.
2. E.S. Savas, Privatization and Public-Private Partnerships (New York: Chatham House Publishers, 2000);
3. E.S. Savas, Privatizing the Public Sector: How to Shrink Government (Chatham, NJ: Chatham House Publishers, 1982);
4. E.S. Savas, Privatization: The Key to Better Government (Chatham, NJ: Chatham House Publishers, 1987);
5. John E. Chubb and Terry Moe, Politics, Markets, and America's Schools (Washington, DC: The Brookings Institution, 1990);
6. William Niskanen, Bureaucracy and Representative Government (Chicago, Aldine/Atherton, 1971);
7. and Gordon Tullock, The Politics of Bureaucracy (Washington, DC: Public Affairs Press, 1965).
8. Donald Kettl, Sharing Power: Public Governance and Private Markets (Washington DC: The Brookings Institution, 1993);
9. John Donahue, The Privatization Decision (New York: Basic Books, 1989);
10. Janet Rothenberg Pack, "Privatization of Public-Sector Services in Theory and Practice, "Journal of Policy Analysis and Management 6 (Summer 1987) : 523-540;
11. Mark Schlesinger, Robert A. Dorwart, and Richard T. Pulice, "Competitive Bidding and States' Purchase of Services: The Case of Mental Health Care in Massachusetts," Journal of Policy Analysis and Management 5 (Winter 1986): 245-263.
12. Robert M. Stein, "Alternative Means of Delivering Municipal Services: 1982-1988," Intergovernmental Perspective 19 (Winter 1993): 27;
13. Robert Jay Dilger, Randolph R. Moffett, and Linda Struyk, "Privatization of Municipal Services in America's Largest Cities," Public Administration Review 57 (January/February 1997): 21-26.
14. Trevor L. Brown and Matthew Potoski, "Managing Contract Performance: A Transaction Costs Approach," Journal of Policy Analysis and Management 22 (Spring 2003): 275-297;
15. Jocelyn M. Johnston and Barbara S. Romzek, "Contracting and Accountability in State Medicaid Reform: Rhetoric, Theories, and Reality," Public Administration Review 59 (September/October 1999): 383-399.
16. Robert M. Spann, "Public Versus Private Provision of Governmental Services," The Sources of Government Growth, ed. Thomas E. Borcherding (Durham, NC: Duke University Press, 1977).
17. John Murawski, "Former United Way Chief Gets 7 Years in Jail: Sentence Praised by Charities," Chronicle of Philanthropy 12 (July 1995): 37-38;
18. Steven Steklow, "New Era's Bennett Gets 12 Years in Prison for Defrauding Charities," Wall Street Journal, 23 September 1997, p. B13;
19. Kurt Eichenwald, "Mining Medicare: How One Hospital Benefited On Questionable Operations," New York Times, 12 August 2003;
20. Milt Freudenheim, "Troubled HealthSouth Faces Medicare Fraud Investigation," New York Times, 11 September 2003, p. C3.
21. Kurt Eichenwald and Matt Richtel, "Enron Trader Pleads Guilty to Conspiracy," New York Times, 18 October 2002, pp. C1, C9.
22. Douglas Jehl, "Evidence Is Cited of Overcharging in Iraq Contract," New York Times, 12 December 2003;
23. Joel Brinkley, "Halliburton Likely To Be a Campaign Issue," New York Times, 14 February 2004, p. A16.
24. Kettl, Sharing Power,
25. H. George Frederickson, The Spirit of Public Administration (San Francisco: Jossey Bass, 1997).
26. Rowan Miranda and Allan Lerner, "Bureaucracy, Organizational Redundancy, and the Privatization of Public Services," Public Administration Review 55 (March/April, 1995): 193-200.
27. Schlesinger, Dorwart, and Pulice, "Competitive Bidding and States' Purchase of Services," 245-263.
28. H. Brinton Milward, "Introduction," Journal of Public Administration: Research and Theory 6 (April 1996): 193-196.
29. Trevor L. Brown and Matthew Potoski, "Contract-Management Capacity in Municipal and County Governments," Public Administration Review 63 (March-April 2003) 153-164;
30. Brown and Potoski, "Managing Contract Performance: A Transaction Costs Approach," 275-297;
31. Kettl, Sharing Power,
32. Barbara S. Romzek and Jocelyn M. Johnston, "State Social Services Contracting: Exploring Determinants of Effective Contract Accountability," Public Administration Review (forthcoming).
33. Donald E. Klingler, John Nalbandian, and Barbara S. Romzek, "Conflicting Expectations and Accountability," American Review of Public Administration 32 (June 2002): 117-144.
34. Elliott D. Sclar, You Don't Always Get What You Pay For: The Economics of Privatization (Ithaca, NY: Cornell University Press, 2000).
35. Kenneth J. Meier, Laurence J. O'Toole Jr., and Sean Nicholson-Crotty, "Multilevel Governance and Organizational Performance: Investigating the Political-bureaucratic Labyrinth," Journal of Policy Analysis and Management 23 (Winter 2004): 31-47;
36. Louise K. Comfort, "Managing Intergovernmental Responses to Terrorism and Other Extreme Events," Publius: The Journal of Federalism 32 (Fall 2002): 29-49;
37. Robert Agranoff and Michael McGuire, "A Jurisdiction-Based Model of Intergovernmental Management," Publius: The Journal of Federalism 28 (Fall 1998): 1-20;
38. Paul Posner, "Accountability and Management Challenges Posed by Third Party Governance Tools," (paper presented at the annual conference of the American Political Science Association, Atlanta, Georgia, 2-5 September 1999).
39. Dilger, Moffett, and Struyk, "Privatization of Municipal Services in America's Largest Cities," 21-26.
40. Brown and Potoski, "Managing Contract Performance: A Transaction Costs Approach," 275-297;
41. Robert D. Behn and Peter A. Kant, "Strategies For Avoiding the Pitfalls of Performance Contracting," Public Productivity and Management Reviews 22 (June 1999): 470-489;
42. Barbara S. Romzek, "Where the Buck Stops: Accountability in Reformed Public Organizations," Transforming Government: Lessons from the Reinvention Laboratories, eds. Patricia W. Ingraham, James R. Thompson, and Ronald P. Sanders (San Francisco: Jossey-Bass, 1998).
43. George A. Boyne, "Bureaucratic Theory Meets Reality: Public Choice and Service Contracting in U.S. Local Government," Public Administration Review 58 (November 1998): 474-484.
44. We recognize that a full analysis of contract management would require attention to many issues (such as political and economic environments) which are beyond the scope of this study, but which nevertheless play a clear role in contracting. See, for example, Jocelyn M. Johnston, Contracting Case Studies in Medicaid Managed Care Series: Implementing Medicaid Managed Care in Kansas: Politics, Economics (Albany, NY: The Rockefeller Institute of Government, 2000).
45. Amy K. Donahue, "The Influence of Management on the Cost of Fire Protection, "Journal of Policy Analysis and Management 23 (Winter 2004): 71-92;
46. Carolyn J. Hill and Laurence E. Lynn Jr., "Governance and Public Management, An Introduction, "Journal of Policy Analysis and Management 23 (Winter 2004): 3-11;
47. Jerrell D. Coggburn and Saundra K. Schneider, "The Quality of Management and Government Performance: An Empirical Analysis of the American States," Public Administration Review 63 (March/April 2003): 206-213;
48. James W. Fossett, Malcolm Goggin, John S. Hall, Jocelyn M. Johnston, Richard Roper, L. Christopher Plein and Carol Weissert, "Managing Medicaid Managed Care: Are States Becoming Prudent Purchasers?" Health Affairs 19 (July/August 2000): 39-49.
49. Brown and Potoski," Contract-Management Capacity in Municipal and County Governments," 153-164;
50. H. George Frederickson and Todd LaPorte, "Airport Security, High Reliability, and the Problem of Rationality," Public Administration Review 62 (September 2002): 33-43;
51. Elizabeth Keating and Peter Frumkin, "Reengineering Nonprofit Financial Accountability: Toward a More Reliable Foundation for Regulation," Public Administration Review 63 (January/February 2003): 3-15.
52. H. Brinton Milward and Keith G. Provan, "Governing the Hollow State," Journal of Public Administration Theory and Research 10 (April 2000): 359-380.
53. U.S. General Accounting Office, Privatization: Lessons Learned by State and Local Governments (Washington, DC: Government Printing Office, 1997);
54. Barbara S. Romzek and Jocelyn M. Johnston, "Reforming Medicaid through Contracting: The Nexus of Implementation and Organizational Culture," Journal of Public Administration Research and Theory 9 (January 1999): 107-139;
55. Barbara S. Romzek and Jocelyn M. Johnston, "Reforming State Social Services through Contracting: Linking Implementation and Organizational Culture," Public Management: New Developments in Theory, Methods, and Practice, eds. Jeffrey Brudney, Laurence O'Toole,Jr., and Hal B. Rainey (Washington, DC: Georgetown University Press, 2000).
56. Nancy McCarthy Snyder and Marcia Allen, "Managing the Uneasy Partnership Between Government and Nonprofits: Lessons from the Kansas Child Welfare Privatization Initiative," (presented at the 25th Annual Research Conference of the Association for Public Policy Analysis and Management, Washington DC, 6 November 2003).
57. Since 1997, nearly 100 interviews have been conducted with administrators in local, state, and federal governments and contract agencies, front-line workers, advocacy groups, evaluators, elected officials, and others.
58. Milward and Provan, "Governing the Hollow State," 359-380.
59. See also Robert Yin, Case Study Research: Design and Methods (Newbury Park, CA: Sage, 1989).
60. Dilger, Moffett, and Struyk, "Privatization of Municipal Services in America's Largest Cities," 21-26.
61. Irene Rubin, "Municipal Contracts: Alike in All Unimportant Respects," (paper presented at the Annual Conference of the Association for Budgeting and Financial Management, Washington, DC, 18-20 September 2003);
62. U.S. Government Accounting Office, Privatization: Lessons Learned by State and Local Governments.
63. All governments recognize the need to involve employees in the privatization process and to provide a safety net for displaced employees. The use of managed competition, whereby public employees and public departments are allowed to submit a bid for service delivery along with private and nonprofit firms, achieves this objective. If the rationale for contracting rests on the potential advantages of competition, then government bids are legitimate additions to those received from the private and nonprofit sectors. Brown and Potoski observe that council-manager types of local government show a preference for contracting with other governmental units or using "joint contracting" to achieve some level of competition. See Brown and Potoski, "Contract-Management Capacity in Municipal and County Governments," 153-164.
64. City of Kansas City, Missouri City Auditor's Office, Performance Audit: MAST Financial Viability (July 2003).
65. Not coincidentally, EPI (the former contractor) had about 400 highly trained and skilled employees it no longer needed. The executive director of MAST reported that 360 of the 400 EPI employees were hired by MAST, including many managers. Kevin Hoffman, "End of Contract Raises Questions For MAST ambulance services," Kansas City Star, 1 July 2003.
66. Fitch and Associates, LLC, Consultant Report: Kansas City Emergency Medical Services System Design (April 2004).
67. Curtis Wood, "Metropolitan Governance in Urban America: A Study of the Kansas City Region" (Ph.D. diss., University of Kansas, 2004). Commercial trash collection in the Kansas City metro area is typically privatized, with no remaining government role.
68. Administrative staff in KCMO-the largest jurisdiction in the metro area - reports that there are no centralized written procedures/policies for assessing the feasibility of contracting out or privatizing a service, for implementing contracts, or for evaluating contractor performance. Although performance measures and standards are typically specified for contracted services, contract performance is monitored and managed by the relevant line department, and not by the centralized management services department in the city manager's office. In 1996, the city auditor recommended a contracting process model that included managed competition and centralized contract monitoring, but the recommendation was not adopted by the city council or the city manager.
69. Increasingly, state social service contracts are designed to shift some risk from the government agency to a contractor. Risk shifting adds more complexity to contracting. The most common form of risk shifting uses pre-established case reimbursement rates, which can create serious financial difficulties for contractors because the actual costs of service often turn out to be significantly higher than originally estimated by both the government and contractors. See Madelyn Freundlich and Sarah Gerstenzang, Privatization of Child Welfare Services: Challenges and Successes (Washington, DC: Children's Rights, Inc., 2003);
70. Charlotte McCullough and Barbara Schmitt, 2000-2001 Management, Finance, and Contracting Survey Final Report (Washington DC: CWLA Press, 2002);
71. Barbara S. Romzek and Jocelyn M. Johnston, "Contract Implementation and Management Effectiveness: A Preliminary Model," Journal of Public Management Research and Theory 12 (July 2002): 423-453;
72. Jocelyn M. Johnston and Barbara S. Romzek, "Examining the Stability Hypothesis: Comparing Stable and Dynamic Systems in Social Service Contracts," (paper presented at the 6th National Public Management Research Conference, Bloomington, IN, October 2001).
73. U.S. Government Accountability Office, Long-Term Care: Federal Oversight of Growing Medicaid Home and Community-Based Waivers Should Be Strengthened (Washington, DC: U.S. Government Printing Office, June 2003).
74. Johnston and Romzek, "Contracting and Accountability in State Medicaid Reform," 383-399;
75. Romzek and Johnston, "Reforming Medicaid through Contracting," 107-139.
76. Johnston and Romzek, "Contracting and Accountability in State Medicaid Reform," 383-399;
77. Jocelyn M. Johnston and Barbara S. Romzek, Implementing State Contracts for Social Services: An Assessment of the Kansas Experience (Washington, DC: The Pricewaterhouse Coopers Endowment for the Business of Government, 2000);
78. Romzek and Johnston, "Reforming Medicaid Through Contracting," 107-139. Initially, 100 percent of the HCBS contract cases were subject to review in a given year.
79. James Bell Associates, External Evaluation of the Kansas Child Welfare System Year End Report: January-December 1998, p. 145.
80. For example, the initial foster care contracts in FY 1997 went to three different providers covering five different regions of the state. In the second round of contracting, which began in FY 2001, contracts were awarded to five contractors, and two of the original contractors each lost one of their regional contracts. More specifically, contracts were awarded to different providers in service regions 1 and 4; as a result the contractor in phase 1 (for region 4) became a subcontractor in phase 2 (for region 4). There has also been a great deal of shifting among subcontractors.
81. Freundlich and Gerstenzang, Privatization of Child Welfare Services. The initial capitation rate resembled the strategy used in managed health care plans, whereby the contractor is paid a fixed rate for each patient and must bear all costs associated with treatment.
82. The cabinet secretary responsible for child welfare saw contracting as the only solution to the dual problems of legal challenges to the state's foster care and adoption system and the reluctance of the state legislature to provide adequate resources to fix the system from within the government.
83. Mike Shields, "Loving the Children...Hating the System," Lawrence Journal World, 26 April 1998, pp. 1A, 4A, 5A.
84. James Bell Associates, External Evaluation of the Kansas Child Welfare System Year End Report: January-December 1998, 145;
85. James Bell Associates, External Evaluation of the Kansas Child Welfare System Year End Report: January-December 1999;
86. Kansas Legislative Division of Post Audit, Verifying Information Provided by the Department of Social and Rehabilitation Services On Its Compliance with the Terms of the Foster Care Lawsuit Settlement Agreement (August 2000).
87. In FYs 2001 and 2002, the U.S. Department of Health and Human Services (HHS) conducted child and family service reviews in 32 states, including Kansas. Kansas failed five of the seven outcome measures, but was in substantial compliance with all but one systemic measure (the state lacked a comprehensive training program for workers). HHS concluded that Kansas was maintaining children safely in their homes, and that children in the state's FCA system receive appropriate education services. Kansas did not meet the minimum federal outcome standards regarding protection from abuse and neglect, placement permanency and stability, continuity of family relationships, ensuring that families have capacity to provide for their children's needs, and adequate physical and mental health services for children. Even so, Kansas fared no better or worse than the other 31 states evaluated by HHS.
88. James W. Fossett, Carol Ebdon, and Norman Brier, "When Is Growth Not Growth? The Curious Case of Mental Budgeting in New York," Public Budgeting and Finance 16 (December 1996): 82-95;
89. David M. Van Slyke, "The Mythology of Privatization in Contracting for Social Services," Public Administration Review 63 (May/June 2003): 296-315.
90. Freundlich and Gerstenzang, Privatization of Child Welfare Services;
91. U.S. General Accounting Office, Child Welfare: Early Experiences Implementing A Managed Care Approach (Washington DC: U.S. Government Printing Office, 1998);
92. Richard P. Nathan and Thomas L. Gais, "Early Findings About the Newest New Federalism for Welfare," Publius: The Journal of Federalism 28 (Summer 1998): 95-104;
93. Richard P. Nathan and Mark Ragan, Federalism and the Challenges of Improving Information Systems for Human Services (The Rockefeller Institute of Government, 2001);
94. Romzek and Johnston, "State Social Services Contracting."
95. U.S. General Accounting Office, Privatization: Lessons Learned by State and Local Governments.
96. Milward, "Introduction."
97. Lawrence J. O'Toole and Kenneth J. Meier, "Modeling the Impact of Public Management: Implications of Structural Context," Journal of Public Administration Research and Theory 9 (1999): 505-526;
98. Laurence E. Lynn, Carolyn J. Heinrich, and Carolyn J. Hill, "Studying Governance and Public Management: Challenges and Prospects," Journal of Public Administration Research and Theory 10 (2000): 233-262;
99. Kenneth J. Meier and Lawrence J. O'Toole, "Managerial Strategies and Behavior in Networks: A Model with Evidence from U.S. Public Education, "Journal of Public Administration Research and Theory 11 (July 2001): 271-293;
100. Agranoff and McGuire, "A Jurisdiction-Based Model of Intergovernmental Management," 1-20.
101. Paul C. Light, "Fact Sheet on the New True Size of Government" (The Brookings Institution, September 2003).
102. U.S. Government Accounting Office, Major Management Challenges and Program Risks: NASA (Washington, DC: U.S. Government Printing Office, 2003), pp. 4-5.
103. The size of the federal workforce has been significantly reduced in the past decade but the need for contract management expertise has increased as the number of contracts let to nongovernmental agencies has exploded. For example, since 1999, 20,000 civil service positions in the Departments of Defense and Energy and NASA have been eliminated. But during the same time period, 560,000 contractor jobs have been created. Of this total, 153,000 additional contractor jobs have been added to the NASA workforce. See Paul C. Light, "Fact Sheet on the New True Size of Government."
104. I b i d.
105. Peter Singer, Corporate Warriors: The Rise of the Privatized Military Industry (Ithaca, NY: Cornell University Press, 2003).
106. A non-competitive, cost-plus contract with Halliburton for reconstruction and related services in post-war Iraq has been given significant attention by Department of Defense auditors and the media, and is under investigation by the GAO. See Center for Public Integrity, "Winning Contractors: U.S. Contractors Reap the Windfalls of Post-War Reconstruction," (30 October 2003).
107. U. S. Government Accounting Office, Major Management Challenges and Program Risks: NASA.
108. NASA's OIG has recommended that NASA contracting officers require contractors to develop company policies for documenting justifications for noncompetitive subcontract awards, document their approval of a contractor's request to subcontract, and allow for expanded use of fixed-price contracting (OIG, NASA, March 2003).
109. U.S. Government Accounting Office, Major Management Challenges and Program Risks: NASA, p. 12.
110. An undefinitized contract action means a unilateral or bilateral contract modification or deliver/task order in which the final price or estimated cost and fee have not been negotiated and mutually agreed to by NASA and the Contractor." See ibid., p. 3.
111. NASA acknowledges that UCAs are a risky way of conducting business because contractors perform work before they have reached agreement with the government on what the work will cost, thereby increasing the risk of cost growth. By November 2002, NASA had reduced the number of UCAs to 19 with a total value of $61 million and had taken significant steps to improve contract management by reducing its use of unnegotiated contract changes. See National Aeronautics and Space Administration, Office of Inspector General, Semiannual Report (Washington, DC: 31 March 2003),
112. National Aeronautics and Space Administration Office of Inspector General, Audit Report: Procurement Workforce Planning (01-041) (Washington, DC: September 2001)
113. and Government Accounting Office, Major Management Challenges and Program Risks: NASA.
114. An external review report had suggested that, given the safety and maturity of the shuttle program, less NASA oversight was necessary (Kraft Report, 1995).
115. National Aeronautics and Space Administration Office of Inspector General, Audit Report: Procurement Workforce Planning.
116. See also Government Accounting Office, Major Management Challenges and Program Risks: NASA.
117. Columbia Accident Investigation Board, Report of the Columbia Accident Investigation Board (26 August 2003), pp. 1-248.
118. John Schwartz, "Computer Program That Analyzed Shuttle Damage Was Misused, Engineer Says," New York Times, 25 August 2003, p. A9.
119. Columbia Accident Investigation Board (CAIB), Report of the Columbia Accident Investigation Board, p. 118.
120. Government Accounting Office, Major Management Challenges and Program Risks: NASA.
121. Johnston and Romzek, "Contracting and Accountability in State Medicaid Reform," 383-399.
122. The five airports are in Kansas City (MO), Jackson Hole (WY), San Francisco (CA), Tupelo (MS), and Greater Rochester (NY).
123. Government Accounting Office, Transportation Security;
124. Frederickson and LaPorte, "Airport Security, High Reliability, and the Problem of Rationality," 33-43.
125. Government Accounting Office, Major Management Challenges and Program Risks: Department of Homeland Security (Washington, DC: U.S. Government Printing Office, January 2003);
126. Government Accounting Office, Transportation Security: Post September 11th Initiatives and Long-Term Challenges, Statement of Gerald L. Dillingham, Director, Physical Infrastructure Issues (2003).
127. Testimony before the U.S House Transportation and Infrastructure Committee Aviation Subcommittee on the Privatization Pilot Program (PP5) on April 22, 2004.
128. One exception to this lack of communication regarding performance standards is the Jackson Hole Airport. The airport manager told us in the summer of 2003 that the TSA supplied the Jackson Hole Airport Board with a set of standard operating procedures for screeners and a statement of work that listed items to be accomplished.
129. Testimony of Clark Kent Irvin, inspector general of the U.S. Department of Homeland Security, before the U.S. House Transportation and Infrastructure Committee Aviation Subcommittee on the Privatization Pilot Program (PP5) on 22 April 2004.
130. Testimony of Norman J. Rabkin, managing director, Homeland Security and Justice, before the U.S. House Transportation and Infrastructure Committee Aviation Subcommittee on the Privatization Pilot Program (PP5) on 22 April 2004.
131. The TSA contracts with Lockheed to train all federalized and privatized airport screeners. While this means that training is centralized and made more uniform, there is also a reduction in local autonomy and flexibility to adjust to changing needs and problems. The TSA, as a result, has invited local airport authorities to make suggestions to improve the training. It seems that training quality is similar for both public and private screeners. In his 22 April 2004 testimony before the U.S. House Transportation and Infrastructure Committee Aviation Subcommittee on the Privatization Pilot Program (PP5), Clark Kent Irvin reported that federalized and privatized airport screeners performed at about the same level, which is to say equally poorly.
132. Control of extraneous variables is virtually impossible in this admittedly exploratory multiple case analysis. The primary objective was not to fully explain similarities and differences across orders of government, but to assess whether they exist and to explore potential explanations for what was observed. See Yin, Case Study Research.
133. Freundlich and Gerstenzang, Privatization of Child Welfare Services.
134. Grace Hobson, "Kansas Still Navigating Private Child Welfare," Kansas City Star, 21 September 2003, p. A1.
135. Barbara S. Romzek and Melvin J. Dubnick, "Accountability in the Public Sector: Lessons From the Challenger Tragedy," Public Administration Review 47 (May/June 1987): 227-238.
136. Jonas Prager, "Contracting Out Government Services: Lessons From the Private Sector," Public Administration Review 54 (March/ April 1994): 176-184;
137. Sclar, You Don't Always Get What You Pay For.
138. McCarthy, Snyder and Allen, "Managing the Uneasy Partnership Between Government and Nonprofits."